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Gross Cookie Company offers credit terms to its customers and uses the allowance method to account for uncollectible accounts. The following information relates to their accounts receivable and allowance for uncollectible accounts.

• At the beginning of 2021, gross accounts receivable totaled $801,000 and the allowance for uncollectible accounts had a credit balance of $42,000.
• During 2021 $26,000 in receivables were written off as uncollectible.
• $2,200 in cash was received in December from a customer whose account previously had been written off.
• Credit sales for 2021 totaled $800,000 and cash collections from customers were $900,000.

Required:

1. Assume the company estimates bad debts by applying a percentage of 10% to accounts receivable at the end of the year. Prepare journal entries to record 1) the write-off of the $26,000 in receivables, 2) the collection of $2,200 for previously written off receivables, and 3) the year-end adjusting entry for bad debt expense.

2. Alternatively, assume the company estimates bad debts by applying a percentage of 5% to credit sales during 2021. Prepare the year-end adjusting entry for bad debt expense.

3. What amount would be shown on the balance sheet for accounts receivable at the end of 2021 in each of the two scenarios above?

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